Editorial: New AT&T iPhone Data, Tethering Plans Equal Future Shock

Long-time iPhone users know that Apple makes “good news” announcements early in the day, a deliberate step to maximize their exposure, and sneaks less positive ones out when the stock market’s closed or journalists are just about to leave the office. So the fact that Apple’s iPhone partner AT&T announced huge changes to its iPhone and iPad data plans in the dead of night with no assistance from Apple should tell you something: there are major changes afoot, and Apple doesn’t want them to cloud its upcoming unveiling of the next-generation iPhone next week.

In short, AT&T revealed two pieces of potentially controversial news: first, that $30 “unlimited” data plans are going away for new iPhone and iPad customers, and second, that it plans to charge $20 for iPhone tethering. Effective June 7, 2010, the company will cap new users at 2GB of data for $25 per month, and offer a $15 monthly plan with 200MB—the same price as the current low-end 250MB per month iPad 3G plan, but with less data. As marginal as the cheaper plan was for the iPad, it looks even less attractive now, quite possibly to push more users into the more expensive monthly offering. Additionally, AT&T will charge $15 plan users an additional $15 for another 200MB if they exceed that cap, while $25 plan users will be assessed an extra $10 for 1GB more if they exceed the 2GB threshold. In other words, stay within your limits, or you’ll pay $30 per month for 400MB, or $35 per month for 3GB, far worse than the old $30 unlimited iPhone and iPad plans.

Initially, our reaction to this news was negative across the board—the first response most users will have. But after we went back and looked at our actual iPhone data usage for the past six or so months, the reality is that there are several current usage scenarios that play out across our editors and their spouses, with almost all of them seeing net positives under the new AT&T data plans.

Best off will be this sample user, who according to AT&T’s “View Past Data Usage” chart (see the first page of your AT&T Wireless account page for your own numbers) has never exceeded 200MB per month in usage. Over the seven months charted here, she could have paid $15 per month for data and never faced an overage charge. If her data usage stays the same under the new iPhone, and she doesn’t want to use a computer for tethering on the road, her data bills could go down by 50%.

Similarly fine will be this sample user, who routinely uses in excess of 200MB per month but far less than 2GB per month. Over the eight months charted here, he could pay $25 per month for data and never have an overage, with plenty of spare bandwidth for a tethered device. Notably, this user’s last month of iPad data usage amounted to around 325MB of data, which on top of the 277MB of iPhone data is still well below the 2GB cap. Paying $45 per month for tethered iPhone + iPad service—if Apple offers tethered data for the iPad—wouldn’t be great, but it wouldn’t be awful, either.

Problems start for users like this one, who has months that fall under or above the 200MB and 400MB caps of the $15 plan. In December, she would have had an overage fee of $15 for a mere 18MB of additional data, with a similar $15 overage in May. But in April, she would have paid $45 for 429MB of data versus $30 under the current iPhone unlimited data plan. Over six months’ time, she would have been better off overall on either the $15 plan or the $25 plan than the $30 plan—a non-trivial fact—but her future bills will fluctuate a lot from month to month, and if she has more months like April going forward, the $15 plan could put her in the hole. She’ll need to pick the $25 plan, or get ripped off every month by overages.

Unfortunately, these charts are all based on prior iPhone usage patterns, and bigger problems are sure to come. Thanks to recently-approved 3G VoIP and video streaming applications, iPhones are just now becoming considerably more capable of using data than they were last year, so people accustomed to staying under 200MB may well wind up facing overages in the near future. There’s significant evidence to suggest that the next-generation iPhone will include video chat functionality, as well, though it’s unclear as to whether the feature will be allowed on AT&T’s 3G network. If it is, expect 3G bandwidth usage to race upwards, as video streaming is amongst the most data-demanding features of an iPhone, and during video chat, it’ll be going in both directions. The 200MB and 2GB plans that are borderline acceptable today may well become constraining within only a few months of the new iPhone’s introduction.

Then there’s the iPad. As the massive uptake of iPads over the last two months illustrates, demand for lightweight portable tablet computers is already surging, and the iPad with Wi-Fi + 3G offers a great way to get anywhere access to the Internet. Tethering to an iPhone with existing data service would be the other—and a logical way to let current iPhone customers enjoy using two devices at a modest premium. AT&T’s $20 tethering fee is not modest. It is only available to users who have already purchased the $25 2GB data plan, and then, offers nothing more than the ability to share that 2GB between the iPhone and another device.

Charging a tethering fee is justifiable under an unlimited or near-unlimited iPhone plan. The logic is clear: you’re given “unlimited” iPhone access with the understanding that you’re not going to use 3G data in a truly unlimited fashion on a device with such a small screen, but that changes when you connect a data-hungry computer or a tablet-class device, which will use far more of the “unlimited” service than a phone. Similarly, if AT&T wants to charge a small fee so that two data plan-sharing devices can each have SIM cards, or separate data phone numbers, or something of that sort, fine. Yet under a capped data plan, you’re paying for a specific amount of data per month and should be able to use as much of it as you want without having to answer to AT&T for what type of data it is, or the devices that are displaying it. A $20 fee for the privilege of using your 2GB plan more fully is ridiculous; a lower fee for tethering, or a similar fee with an unlimited plan would have been less objectionable.

Readers, what do you think of the new AT&T data plans? Does the company have some adjustments to make before WWDC next week, particularly in the tethering department, or are you satisfied with what it has come up with? Voice your opinions in the comments section below.